Armed with as much as $500 billion combined in cash — more than two times what the top 20 healthcare companies have on hand — top tech companies are continuing a steady march into the healthcare industry utilizing the same tools that have allowed them to disrupt other industries.
According to RBC Capital Markets LLC's "Imagine 2025" report, the big five tech companies — Alphabet Inc., Apple Inc., Microsoft Corp., Facebook Inc. and Amazon.com Inc. — each have different strategies for "attacking" the healthcare industry. The report's co-author and RBC Capital Markets' managing director Randall Stanicky said the billions in capital will help them do just that.
"We're absolutely at a tipping point, and 2021 is going to be the year that investors will probably really start to focus on digital health and the impact of tech in the healthcare sector," Stanicky told S&P Global Market Intelligence in an interview.
Amazon announced in November the launch of Amazon Pharmacy, an online prescription ordering and delivery system for users, following the $753 million acquisition of online pharmacy PillPack Inc. in 2018.
"Anybody who thought Amazon was done or was not continuing to look to move further into healthcare, this was a wake-up call for sure," Stanicky said.
The healthcare industry presents an even greater opportunity for big tech companies to not only make more money but also gain access to an immense amount of user data. This patient data combined with user connectivity would make a company very valuable, Stanicky said.
Chronic illnesses like heart disease and diabetes, and mental health conditions make up 90% of the U.S.'s $3.5 trillion in healthcare spending, according to the U.S. Centers for Disease Control and Prevention. Catering to this market can mean major profits for tech companies because these diseases require long-term management.
These markets have been top-of-mind for some big tech companies for years as they develop wearable devices. Apple, Amazon and Google, through the web search giant's Fitbit acquisition, have each made moves into the fitness wearables market with devices equipped with heart rate monitors and, in Apple's case, pulse oximetry.
While the healthcare industry is just now coming around to embrace new technology like telehealth and remote patient monitoring tools, Stanicky said there is evidence the public is ready for the entry of big tech into healthcare.
"We're seeing this wave of consumerism ... where people realize that there's decisions, there's better outcomes, there's opportunities to pursue their healthcare coverage benefits in different ways than of the past, and big tech ironically has better connectivity to the consumer than does healthcare even if you look at it on an aggregate payer basis," Stanicky said.
Big tech strategies
Unlike its big tech rivals, Microsoft has focused on collaborating with existing legacy health systems instead of carving out a new path in healthcare, according to the Imagine 2025 report. Stanicky said some of the reasons for this include the data privacy issues that come with digitizing healthcare and the fact that the U.S. healthcare system is so fragmented.
One example is when Microsoft made its chatbot technology available to the CDC and hospitals like Providence St. Joseph Health to help the public check for symptoms of COVID-19. Microsoft also announced in May the release of Microsoft Cloud for Healthcare to improve healthcare companies' outcomes.
Similarly, Google LLC and parent company Alphabet have a "partnership-heavy" healthcare strategy focused on data collection, disease detection and management and digital tools, according to the report. This approach led to several notable partnerships in 2020 including Google's efforts alongside competitor Apple to create a COVID-19 exposure notification app.
Amazon Pharmacy launched on Nov. 17 following the 2018 acquisition of online pharmacy PillPack.
Source: Amazon Inc.
Amazon and Apple, however, have much more intrusive ambitions in the healthcare market.
"If you zoom out into the future, and you look back, and you ask the question, 'What was Apple's greatest contribution to mankind?' It will be about health," Apple CEO Tim Cook said in a 2019 CNBC interview.
Apple's strategy centers around data collection, the Imagine 2025 report said. Between the Apple Watch devices and Apple's ResearchKit, which allows third-party developers to create apps that help them conduct research studies, the company is gathering large amounts of data.
For Amazon, the goal is to provide a different user experience from what is currently available on the market. This was evident following the release of Amazon Pharmacy. T.J. Parker, vice president of Amazon Pharmacy, said in a Nov. 17 release that the goal of the new unit was to bring Amazon's customer-based mindset to an industry that can be "inconvenient and confusing."
The new COVID norm
With COVID-19 still top-of-mind going into 2021 — even as vaccines finally make their way to market — 451 Research senior research analyst Brian O'Rourke said big tech's healthcare moves may not be as transformative in the coming year. He expects that 2021's moves will look a lot like 2020, with a focus on remote patient monitoring, such as at-home electrocardiogram devices.
"I don't anticipate next year will be significantly different than this year," O'Rourke said. "COVID has not created a market in [ECGs]. But it has created a little bit more of a demand for services like that."
Stanicky said there is still room for surprises over the next couple of years, perhaps in the form of tech companies building an ecosystem for employees and then scaling it up for patients at-large.
Amazon, for example, created a telehealth service for their employees called Amazon Care and joined Berkshire Hathaway Inc. and JPMorgan Chase & Co. in creating the healthcare partnership Haven for employees.
But the collection of data, however valuable to big tech companies, could still be a hitch for consumers.
" Given big tech's track record over the last few years, I think it's reasonable that consumers may wonder how their very, very personal data is going to be used," O'Rourke said.
451 Research and S&P Global Market Intelligence are owned by S&P Global Inc.